Economics, Econometrics and Finance
7 years ago

Real estate betas boost diversified portfolios, improving risk-return ratios.

The Journal of Investing
Real Estate Betas and the Implications for Asset Allocation
Peter Mladina

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Real estate is a unique type of investment that can enhance diversified portfolios by providing a mix of different risk factors. By analyzing real estate investment trust returns, researchers found that real estate is a hybrid asset class with both compensated and uncompensated risks. Private real estate also adds risk due to misappraisals. Including real estate in multiasset portfolios can improve their performance. This study suggests that considering real estate in asset allocation strategies can lead to better outcomes for investors.